62% equity mutual fund schemes failed to beat benchmarks in five, seven years

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Around 62% equity mutual fund schemes failed to beat their respective benchmarks in the five-year and seven-year horizons. ETMutualFunds considered the performance (CAGR) of 174 schemes in the five-year horizon, and 165 schemes in the seven-year period and compared their performance with relevant current benchmarks. We also looked at the rolling returns for five and seven-year periods and compared them with their current benchmarks.

How equity schemes performed?

Five Years Seven Years
Total equity schemes 174 165
Number of schemes underperformed 108 103
% of schemes that underperformed 62% 62%

Source: ACE MF

Only three equity mutual fund categories – contra, multi cap, and small cap schemes – managed to beat their benchmarks convincingly in the five year period. The rest of the categories fared badly. The same categories – contra, multi cap, and small cap – also did well in the seven-year horizon.

The large cap category was the worst hit in the five-year horizon. Out of 26 schemes, 24 schemes failed to beat their benchmarks. That is a whopping 92% underperformance. Around 81% of the large & mid cap schemes failed to beat their benchmarks. Most equity-linked saving schemes (ELSS) also underperformed their benchmarks. Out of 34 schemes, 26 ELSS schemes underperformed their benchmarks. Out of 21 flexi cap schemes, 13 schemes failed to beat their benchmarks.

How categories fared in five years?
Category Total Schemes Schemes underperformed % of underperformance
Large cap funds 26 24 92%
Large & Mid cap funds 21 17 81%
ELSS 34 26 76%
Flexi cap funds 21 13 62%
Value funds 12 7 58%
Mid cap funds 21 12 57%
Focused funds 14 7 50%
Small cap funds 15 2 13%
Multi cap funds 7 0 0%
Contra funds 3 0 0%

Source: ACE MF

Large cap category was the worst hit even in the seven-year horizon. Around 23 schemes out of the 25 schemes, underperformed their benchmarks. Out of 20 schemes, 17 large & mid cap schemes also failed to beat their benchmarks. Around 15 schemes out of 20 mid cap schemes, failed to match their benchmark returns. Around 8 focused schemes also failed to beat their benchmarks.

Most flexi cap schemes also failed to beat their benchmark in a seven-year horizon. Out of 21 schemes, 14 schemes have failed to beat their benchmarks. Around 30 ELSS schemes out of which 20 schemes also failed to beat their benchmarks.

Performance in seven years
Category Total Schemes Schemes underperformed % of underperformance
Large Cap Fund 25 23 92%
Large & Mid Cap 20 17 85%
Mid Cap Fund 20 15 75%
Flexi Cap Fund 21 14 67%
ELSS 30 20 67%
Focused Fund 14 8 57%
Value Fund 12 5 42%
Small cap Fund 14 2 14%
Multi Cap Fund 6 0 0%
Contra 3 0 0%

Source: ACE MF

Most large cap, large & mid cap, mid cap schemes, equity-linked saving schemes, and flexi cap schemes failed to beat their respective benchmarks in both five and seven-year horizons.

Apart from the trailing returns, we analyzed the performance of these schemes based on the rolling returns delivered by them in five and seven-year horizons. We then compared them with rolling benchmark returns for the same period.

Around 46% equity schemes failed to beat their respective benchmarks in the five-year and about 22% in seven-year horizons.

Rolling returns – underperformance of equity schemes
Five Years Seven Years
Number of equity schemes 174 165
Schemes underperformed 80 37
% of underperformance 46% 22%

Mid cap category was the worst hit in the five-year period. Around 13 out of 21 mid cap schemes failed to beat the benchmark. Around 15 large cap schemes failed to beat the benchmark. About 8 focused schemes failed to beat the benchmark. Out of 34 ELSS schemes, 18 schemes have failed to beat their benchmark.

Category–wise performance in five years (rolling returns)
Category No. of schemes No. of schemes Underperformed % of underperformance
Mid Cap Fund 21 13 61.90%
Large Cap Fund 26 15 57.69%
Focused Fund 14 8 57.14%
ELSS 34 18 52.94%
Flexi Cap Fund 21 10 47.62%
Large & Mid Cap 21 9 42.86%
Contra 3 1 33.33%
Value Fund 12 3 25.00%
Small cap Fund 15 3 20.00%
Multi Cap Fund 7 0 0.00%

Source: ACE MF

Multi cap schemes, small cap schemes, value funds and contra funds outperformed their respective benchmarks.

In the seven-year horizon, large & mid cap category was the worst hit. Around 10 schemes, out of 20 schemes have failed to beat their benchmark. Out of 25 large cap schemes, 10 schemes have underperformed.

Category–wise performance of equity schemes in seven-year horizon (rolling returns)
Category No. of schemes No. of schemes Underperformed % of underperformance
Large & Mid Cap 20 10 50.00%
Large Cap Fund 25 10 40.00%
Focused Fund 14 5 35.71%
Contra 3 1 33.33%
Flexi Cap Fund 21 5 23.81%
Mid Cap Fund 20 4 20.00%
Small cap Fund 14 1 7.14%
ELSS 30 1 3.33%
Multi Cap Fund 6 0 0.00%
Value Fund 12 0 0.00%

Source: ACE MF

Most of the categories have been able to beat their benchmark in the seven-year horizon.

We considered – large cap, large & mid-cap, mid cap, small cap, multi cap, flexi cap, focused, contra, value-oriented, and ELSS categories for the study. The five-year and seven-year rolling and trailing performance of the schemes is compared to their respective current benchmark performances during the same horizons.

Note, this is not a recommendation. This is just an exercise to see how these schemes fared vis-a-vis their benchmarks. We have considered their current benchmarks for the study. For recommendations, please read our best recommended schemes in 2022.

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